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Price Transparency Laws Don’t Work

In a functioning market, you know what you owe before you buy a good or service. That is not the case in health care, as we know. Because of increasing deductibles, the failure of price transparency is becoming increasingly irritating to patients.

Some believe a solution can be legislated. This has occurred in New York and Massachusetts; and one of my favorite state legislators, Senator Nancy Barto, has tried to legislate it in Arizona.

Effective January 2014, Massachusetts law requires health providers to provide a maximum price for a procedure within 48-hours of a prospective patient asking. Well, it has not worked, according to a ”secret shopper” survey of professionals conducted by the Pioneer Institute:

Dermatology practices were asked the price of a routine exam and removal of a wart. Office staff were not well informed about the law and didn’t have systems in place to provide prospective patients with price information.

When price information was obtained, it often came in wide bands such as from $85 to nearly $400

Gastroenterology practices were asked for the price of a “routine screening” colonoscopy with no removal or biopsy of polyps. This proved to be the most complex request because the procedure requires at least three fees: the gastroenterologist’s, the anesthesiologist’s and the hospital or clinic facility fee.

Many doctors, facilities and anesthesiology services required the consumer to provide a “current procedural terminology code” to get a price estimate despite its not being required under state law. When all three fees were included, the overall routine colonoscopy fee ranged from around $1,300 to $10,000.

I have always suspected that laws which simply command that prices shall be transparent would fail, and it looks like I am being proved correct. They simply cannot be reasonably enforced. A better solution is what I call the common law approach.